Due Diligence Background Checks


Due diligence, background investigation, and recruiters are just some words you might have heard around you. In the rapidly changing corporate environment, due diligence has become something of a necessity. So, what is it, and why do we need it?

What Is Due Diligence?

Due diligence is carried out to evaluate the qualifications and track records of the people who are part of a financial deal. Its aim is to root out untrustworthy people by carrying out a background investigation for inconsistencies and omissions.

When Is Due Diligence Performed?

Companies carry out the background investigation before undertaking top-level transactions. For instance, in the face of merger or acquisition, forming partnerships or investing capital into a company. For example, a bank may conduct due diligence on a company that is asking for a loan. It is on the basis of the results that the bank will decide whether or not to lend them money. Due diligence is also done by recruiters who want to know if the employee is who he/she claims to be. The goal is to see the background of the person or business entity completely.

Why is Due Diligence done?

In this age where information is power, due diligence aims to gather as much intel on a company as possible to help companies make an informed decision.

Who can request Due Diligence?

Not everyone has the authority to request a background investigation. It is conducted on behalf of small and medium-sized businesses and multinationals. Due diligence is carried out by a specific legal team which is involved in the deal. They are sworn to protect the nature of this investigation under any circumstances.

What are the components of Due Diligence?

Since the aim is to give a complete picture, due diligence looks into several areas to gather information. These include the following:

  • Background investigation looks into personal and professional history. It looks into work history, affiliations, and the board memberships which the individual may have held.
  • Due diligence does a historical background check. The recruiters want to know if the business or individual has appeared on the news and for what reason.
  • Criminal history and litigation are also some areas in which investigators carry out due diligence
  • Financial history is also investigated to see how much debt the entity or individuals owe and for how long.
  • Credit history is another area which investigated to see the credibility of the person or business.
  • Driving history and sex scandals are also scanned by the investigators.

The Findings

Several issues come to light once the background investigation is carried out. These include:

  • Misrepresentation of employment history
  • Criminal records such as driving under the influence
  • Tax fraud
  • Lawsuits for harassment or fraud

    There is so much more that the process of due diligence uncovers. It is, therefore, essential to have it done. If you are considering getting into bed with a big organization, you should have due diligence carried out. You will never know the findings you might uncover. Remember, it is better to be safe than sorry, especially when it comes to money matters.